Home News 2008 all over again? BofA is offering zero-down-payment, zero-closing cost mortgages for minority communities — here’s what you need to know about the program

2008 all over again? BofA is offering zero-down-payment, zero-closing cost mortgages for minority communities — here’s what you need to know about the program

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2008 again? BofA provides zero down payment, zero closing cost mortgages to minority communities. Here’s what you need to know about this program.

A new program from a major American bank aims to help minority first-time buyers finance their home purchase with no down payment or closing fees. This is good news for buyers at a time when rising interest rates and declining home inventories are unfavorable.

It’s also the latest response to long-standing criticism that banks favor white borrowers.

bank of america Test Plan It will launch in Los Angeles, Dallas, Detroit, and Charlotte, targeting primarily minority neighborhoods in those cities. Offer loans to minority buyers without requiring a down payment, closing costs, or private mortgage insurance (PMI), typical additional costs for buyers paying less than 20% of the home purchase price.

Importantly, this program also does not require a minimum credit score. Instead, it focuses on a solid track record of rent payments for renters and regular monthly bills such as utility bills and phone bills. Before applying, buyers must complete a homebuyer certification course that advises on ownership liability and other considerations.

But Bank of America (and other large lenders) has been criticized in the past for predatory lending practices, particularly lending to minority groups, so the move quickly sparked mixed reactions online. rice field.

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No Down Payment Loan — Timely Boost

Financing comes at a critical time for buyers in Bank of America’s test cities.

Rising interest rates make home loans more expensive It also creates downward pressure on lenders to ensure that loans are as risk-averse as possible. Bank of America’s program aims to break through this by freeing eligible applicants from down payments, credit score criteria, and PMI costs.

This reduces many of the barriers to homeownership for buyers in communities battling institutional lending, which often favors white borrowers.

AJ Barkley, Head of Neighborhood and Community Lending at Bank of America, said:

In 2020, the homeownership rate for white households was 72.1%. National Real Estate Association — compared to 51.1% of Hispanic households and 43.4% of Black households.

Black borrowers are also rejected at twice the rate of the overall borrower pool. Recent Reports from LendingTree.

Bank of America’s plan $15 billion program This will provide closing costs and down payment assistance to low-income buyers, and a separate fund aimed at providing $15 billion in mortgages to low- and middle-income buyers by mid-2027. ‘s initiative.

read more: “Stay Away From ‘Financial La La Land’: Suze Oman Says Most Americans Need To Do This Now To Survive The Next Crisis”

equity risk

Critics of the program, however, were quick to point out that it could backfire and harm the communities it was designed to help.

The housing crisis of 2008 — This was greatly facilitated by risky loans to unqualified buyers — Taught a hard lesson to stuck lenders in foreclosed homes after buyers stopped paying for properties they could never afford.

The results were devastating.The lender inherits the foreclosed home and the buyer their credit score sink.

At least some of Bank of America’s new program borrowers may be considered “subprime” under normal lending rules. For example, his credit company Experian considers borrowers with credit scores between 580 and 669 to be subprime.

And while credit scores are not always an accurate barometer of a buyer’s purchasing power or ability to make timely payments, proponents believe that the interest rates needed to compensate for the low standards set by lenders are a minority. We are concerned that this may lead to failure of the popular buyers.

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This article is for informational purposes only and should not be construed as advice. It is provided without warranty of any kind.

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